Wednesday, December 23, 2009

Yesterday, a caller to Rush Limbaugh made a point that small businesses across America should shut down for a few weeks, lay off their employees, and help flood state unemployment offices with new applicants in response to the healthcare bill. Not just the healthcare bill but the raft of new taxes that will fall on people earning $250K or more. These are small business owners. The basic crux of what he was saying was that business runs the country and not politicians. They should shut down the money spigot and this will make big government plans unworkable.

There is an idea in economic theory regarding tax policy and how high the tax rate has to be to discourage new investment. At what point do excessive taxes literally make it preferable for business people not to work and just shut it down? The president's economic team believes it is 60%. This means that the federales have to take 60 cents of every $1 for business people to finally say: Enough!

How small business responds to their new tax obligations will be interesting. I know enough wealthy people to know that I may have been wrong in thinking that a 40% marginal tax rate was already discouraging. The relatively small sample of wealthy folks I know will probably not scale down the business as a form of protest. Thus, they deserve to be taxed. If you are unwilling to take a stand and shut it down at some sacrifice to your own income than you deserve to have people in Congress tell you what you can and cannot keep. Most of the people in Congress, including the President, have never actually produced much in their lives or created a job or done much more than basically tell others what to do via academic writings. Many of the people passing these laws tend to view business people as mindless sheep with no real intellectual depth beyond just seeking to make a buck. They may be right.

That's why I am interested to see what's going to happen and how the people who are going to pay for all this will respond. I assume they'll take it on the chin, huff and puff, and ultimately just shut up, rollover, and pay the extra taxes Obama and the liberals have in store for them. If they do, they deserve to pay every tax that's been levied on them. And in the coming years when we need to do a massive fix to pay for the looming Social Security crisis, these people will be tapped for that. And the same for Medicare. And the same for Cap and Trade. Politicians are getting away with letting the majority make no sacrifices in terms of paying extra taxes to get these types of giveaways. Why would an average person be against this healthcare reform? Since they pay literally no to little in taxes and will now get healthcare benefits that is cheap and free in many cases, why would you not be for that?

The healthcare taxes are just the first of a lot of future taxes the rich will be paying. I hate to agree with Rush Limbaugh's caller because in almost any normal time it would seem wacky. But this is not normal times and we are morphing into a socialist welfare state that is not the America I thought I knew. I don't happen to be in the position where I have a few million in assets and an income in the $500K+ range so that I would be the one faced with this decision. I acknowledge it's easier for me to write this than for someone else to do this. If the rich can't stand up now, they deserve what they get and should shut up and pay their masters.

Monday, December 14, 2009

Today the renowned economist Paul Samuelson died. His legacy made mathematics a central part of graduate economics and his influence is felt today in Obama's economic policies. He basically believed the geniuses he trained at MIT could and should manage the U.S. economy.

Unfortunately, these views still prevail every time Obama steps out and pronounces that we spend more to rejuvenate the economy. Paul Samuelson essentially advocated that when the economy is bad, government should step in and prop it up by spending as a short-term measure to stimulate demand. He basically helped advocate Keynesian economics for a new generation of the best and the brightest in the 1950's and 1960's.

Reading the old timers like Samuelson, John Kenneth Galbraith, and even Keynes is like reading up on early 20th century phrenology or eugenics. It's interesting for the time. But we have a better, or should have by now, a better idea of what's under the hood. No, head size is not a meaningful measure of intelligence. Nor is the idea that any central planner no matter how high an IQ can truly manage the complicated interaction of a vast economy.

Let's hope that as the old masters die away, their ideas die away with them. So that we can finally move ahead and improve the lives of millions of people who are struggling with unemployment, confusion, and bosses who don't know what's going on in the nation's capital.

Sunday, December 13, 2009

President Barack Obama lashed out at Wall Street, calling bankers "fat cats" who don't get it, in an escalation of tensions with the industry.Mr. Obama, speaking on the eve of Monday's meeting with the heads of major banks at the White House, said he would try to persuade bankers to free up more credit to businesses, with the aim of boosting job growth. But the president also expressed frustration with banks that the government has assisted."I did not run for office to be helping out a bunch of fat cat bankers on Wall Street," Mr. Obama said in an interview on CBS's "60 Minutes" program on Sunday."They're still puzzled why is it that people are mad at the banks. Well, let's see," he said. "You guys are drawing down $10, $20 million bonuses after America went through the worst economic year that it's gone through in -- in decades, and you guys caused the problem. And we've got 10% unemployment."

At this point, all I ask is for a degree of professionalism in the job you hold. Is that too much. Calling bankers "Fat Cats"? What is this? Are we back to the Monopoly game caricature days?

See my last post, but yes, it makes sense for bankers not to be making loans. It's your own policies and the Fed Bank's policies that are giving them every incentive in the world to do. An interest free loan where they turn around and buy a T-Bill for 3 to 4 percent from the government that lent them the money. I'd say that's an incentive to not lend since there's little risk, wouldn't you? This man has been told how great he is by his sycophants for so long, I don't think he knows how to take responsibility for the stupid things he's done. Bad policies have consequences. Why lash out when your only seeing the fruits of what you've done? Just admit your mistakes and change your approach. Instead he just increases spending, pushes harder for an awful healthcare, energy, and other miscellaneous plans. The last thing a liberal can do is admit they're wrong. So I understand it, I just wish we were dealing with normal people.

Tuesday, December 8, 2009

This question is in the news often and held up often as a potential obstacle to an economic recovery. I would suggest that a primary reason is due to Fed policy and 0% interest rates. If you are a bank and have had a bad year and have a lot of commercial real estate loans outstanding that may yet go bad in 2010, you would be smart to use Fed policy to your advantage. This means that you would take a 0% loan from the Fed discount window and invest much of it in 3% or 4% treasury bonds.

This bank money would have went to borrowers who aren't necessarily bad borrowers but may not be the absolute best credit risks. A portion of bank lending that would have went to marginally ok borrowers to start a business is not going to them because banks have probably decided it is obviously less risky to pocket a net gain of 3% to 4% rather than lend it and incur a risk that your borrower may not pay it back, especially because this is a bad economy. Even if a business idea is good it could still tank in this environment. So banks end up lending to only very good credit risks. Which makes sense. But those who have sterling credit are often not the high-end entrepreneur risk takers that make fortunes and spur economic recoveries. People with no debt whatsoever tend to be pretty practical people. Not all debt is bad provided that it is incurred to provide an investment with a solid stream of future income.

Unless banks stop acting in their self interest and pocket the spread they can get between T-Bills and Fed 0% rates, lending will probably stay poor. And an economic recovery will not be gangbusters. This is an example of the unintended consequences of government intervention.

Friday, December 4, 2009

There is something fishy in todays numbers. Maybe the BLS has been told what they can report and to stop with all the negative numbers. Not clear why ADP numbers from Wednesday were 169K and this was only 11K. Something isn't jibing.

Thursday, December 3, 2009

During today's no-holds barred, I am open to (almost) anything "jobs summit", President Obama calls out for the creation of new jobs.

"The president said there were some ideas that could be put to work almost immediately and other ideas that will become part of legislation for Congress to consider. He listed "moving forward on an aggressive agenda for energy efficiency and weatherization" as a prime candidate for quick action."

"Weatherization", if you look on the recovery.org website has already taken a lot of the stimulus "jobs" in various states. I am not sure if I want to laugh or cry that our president doesn't really appear to know how to foster a robust economy and the creation of new jobs and is looking to legislation from an overwhelmingly liberal Congress to do the trick. I am not sure what he meant by:

"But he said he puts a lot of faith in American ingenuity and industry. "We can't go back to business as usual," he said."

We can't go back to business as usual? What the heck does that mean? Job creation is actually not that complex a process to figure out. The fact that we're in December and he's finally thinking about this indicates he's in serious trouble and he's doing some CYA work here. You can't really expect to add various taxes on the people with capital and than expect the people with capital to put it to work to create jobs. At least I didn't think so. But maybe I missed that economics lesson.

How's "growing the economy from the bottom up", as Obama pledged to do during the campaign, working out?

"Throughout this period, our troop levels in Afghanistan remained a fraction of what they were in Iraq," Obama said. "Commanders in Afghanistan repeatedly asked for support to deal with the reemergence of the Taliban, but these reinforcements did not arrive."

Apparently Donald Rumsfeld the then-Secretary of Defense begged to differ:

"The president's assertion does a disservice to the truth and, in particular, to the thousands of men and women in uniform who have fought, served and sacrificed in Afghanistan," Rumsfeld said. He urged Congress to review the claim in the upcoming debate to "determine exactly what requests were made, who made them, and where and why in the chain of command they were denied."

Normally, the media would check out a statement like that from a President during a major policy address. But why should they bother fact checking now? He just says stuff. And it's ok. It's Obama.

Today an ADP report said we lost another 169K jobs in November. That it is December 2 and we're still seeing this is itself really amazing. But I assure you it's good news because the rate of decline is slower than it was last month when we only lost 195K jobs. On Friday, the official Labor Dept numbers come out. Will be interesting.

Obama hosts a job summit tomorrow to distract from the still awful jobs market over 10 months into his presidency. I guess it takes 5 years at least for people to realize they want to make money and act in their self interest to get a job or start a business. Obviously, the fact that you still have this is due to lousy economic policies since people always have an inherent tendency to want or need to work. The job summit dog and pony show will convey the "we're doing something" mentality. The Romans used the games to distract people, Obama uses a job summit.

Monday, November 23, 2009

The National Association of Business Economists predicts some good things for the U.S. economy in 2010.

"The latest survey by NABE notes that sluggish consumer spending will continue to weigh on the economy. But it predicts rebounds in housing, growth from business spending as more companies restock lean inventories, and a rise in stock prices."

To me, it seems the height of insanity to believe that housing will rebound in 2010. The federal homebuyer tax credits will expire next year, interest rates can only go up, people without jobs don't tend to buy houses, and the number of foreclosures is not likely to stop increasing anytime soon. I suppose it is possible that the nominal value of housing will increase IF inflation starts to take off. In the absence of a more general inflation, as a consequence of current Fed policy, I don't see how housing prices will go up all that much if at all.

I can see how restocking lean inventories makes sense. Although some of that may already be happening. I wouldn't expect a massive increase in business spending.

Finally, I can't see how stock prices will continue to rise. The Dow Jones Ind Average is already at 10,500 and I think it's been over-valued for a long time. How much does NABE expect this to rise? Are we going to 12,000! I have admittedly been wrong, and mystified frankly, by how it has persisted at the plus-10,000 number for this long. Nonetheless, it makes no sense to think the stock market is going to rise significantly.

All in all, I understand the models these people use to make these forecasts. I just think they're insane in using them to predict things that make little intuitive sense. Maybe once the "stimulus" money runs out and the Fed stops the magic tricks with the money supply will see a massive wave of new optimism in the economy. Despite the fact that employers will have significant increases in their operating expenses due to new taxes in a variety of areas. How did that Saturday night vote in the Senate go?

Saturday, November 21, 2009

He says his trip to China will create more jobs. This despite the fact that nothing tangible was actually accomplished. Or that one of the major gripes of the Chinese has been that he's imposed tariffs on some of the Chinese made goods we import such as tires. Or that he's devalued the dollar, which negatively impacts global trade flows from China's perspective although it props up our export industries. We can see all the massive job gains we've had from the implementation of a cheap dollar, export driven approach though can't we? It doesn't matter. All of a sudden Barack is a fan of free trade and all the jobs it can in fact create.

Another day another few billion dollars. More good soundin words. Our amateur hour, who wants to be president, night rolls on. How many more hours til last call?

Hopefully he will catch on. He has a real shot of beating O'Nightmare in 2012. He's conservative, honest, articulate in an aw-shucks sort of straightforward way. And he's a handsome dude, which I've found from personal experience, has never hurt :) A guy like Thune would be a whole lot better than Palin, Romney, Huckabee or the other cast of characters in the GOP. Hopefully he's interested.

Wednesday, November 11, 2009

When gold was $1,000 an ounce, I said to friends it would easily go to $1,500 and possibly even $2,000 over the next couple of years. To predict that is complete insanity. My friends think it's nuts. And it probably is. But it is up over $1,100. That's kind of nutty.

I still think I'm right. When government borrows money on a ludicrous scale that they have little hope of ever recovering, the value of the dollar tanks. Simply put, it takes more dollars to buy stuff like gas, gold, and other commodities. Eventually inflation will kick in, though probably not for awhile.

Because I can see Obama's soul in the same way Bush said he could see Vlad Putin's soul :-) I believe Obama doesn't really care that he's emptying the Treasury. His friends in academia will eventually write how great and courageous he was as a president in the books to come over the next several decades. All the while the task of "fundamentally remaking America" as he pledged to do is underway. A remade America will look a lot like Europe in the 1970's. We'll have double-digit unemployment, declines in entrepreneurship and business activity, and less and less innovation. But we'll have "free healthcare" - eventually. It will be a great place for those with little ambition and few goals in life.

There's always hope though. The American people may wise up yet as the nation's finances get worse and worse.

Tuesday, November 10, 2009

This is up from forecasts 6 months ago when people were between the 9.5% and 10.2% range. I have said 12% by the end of 2010 all along. I stand by that today. The reason is that this recession has 2 waves. Wave 1 is about coming to an end. It's the natural cyclical variation in an economy after a shock like we had last September. It should have already ended but Obama confusion has set in.

Wave 2 is coming. Most economists are missing this because they are slaves to panel data sets and modeling. Forecasting the future is as much about intuition as it is analysis. Wave 2 is due to Obama policies becoming law, "stimulus" spending being wound down, and the Fed putting the brakes on liquidity, which they will have to do. Wave 2 is going to be ugly but will hit when the Senate passes a healthcare bill that will start a frenzy of panic for small business owners trying to figure out what it means and being horrified when they do finally figure it out. It has implications.

So, we'll see. I could actually see it going even higher than 12%. Hopefully, it won't hit me.

Monday, November 2, 2009

President Obama's claim that the stimulus has saved 650K jobs is a great example of the poverty of using static analysis in economic modeling. Most of the stimulus is said to have gone to save public sector jobs such as teachers and police with the idea that these would have been cut without it.

Suppose these jobs were cut. Suppose all 650K would have been laid off. A dynamic economic modeling approach where actual decisions would have been made by each person in the absence of the stimulus would likely reveal it is much lower. For example, suppose all 650K were laid off. How would they react? If all of them literally sat home on the couch and didn't look for a new job, the number would be right. What you would expect is that at least a portion of them would have looked for and found some other work. Further, the amount of taxpayer money (a portion of the $787B that has been spent) that was diverted back to temporarily save these jobs could have gone to economic producers such as businesses. Perhaps if government actions like this that choke off business investment weren't attempted maybe we'd have a sustainable recovery underway by now and new jobs would have been created for a portion of these 650K to fill. We'll never know. How many job openings have been postponed that would have arisen without massive government intervention policies? Unlike the government, I won't guess.

Anyway, a more thorough dynamic model would not view all public employees as merely passive couch potatoes who wouldn't look for a new job elsewhere. When the temporary stimulus runs out and public employees have to paid out of the normal flow of tax revenues, we will find out. We'll probably see these jobs on the chopping block in a year or two and we can test the thesis later. The only long-term way to keep government funded jobs going is for tax revenues to rise as taxable income rises as people go back to work. A stimulus like this only delays the inevitable day of reckoning. Enjoy the growth while it lasts.

Sunday, November 1, 2009

My favorite recurring Obama line is that he didn't get us into the mess but he's trying to clean up the mess. It's clever. He's right on one hand. He inherited a bad fiscal and economic downturn that was well underway before he was sworn in. On the other hand, people aren't completely stupid enough to believe that his policies, which essentially boil down to borrow and spend more, start a trillion dollar overhaul of healthcare, and regulate, are going to help restore anything.

Who knows how many more people have to endure this pain simply because business is scared to death of President Obama's policies.

So how long should it take for the economy to recover? I thought that by early Summer things could start to go back up under sound economic policies. We had an artificial boost in growth in the 3rd quarter. Nobody believes it is going to get better than that anytime soon. I wonder what his timeframe is? Does it take a year? Two years? Five? Is there any reason why we shouldn't already start to see businesses hiring again? I think I know.

Friday, October 30, 2009

$339B of the $787B has been spent and 650K jobs created (or saved). That's only $521,539 per job. As I have said before, that is one great job! When the President publishes these numbers its bad enough. When the people believe something like this, it's unforgiveable. In that case, the American people deserve what they've voted for. You like Socialism? Let's see how it plays out. Enjoy the ride.

I think I've come to a point where I see the train coming and I, along with a multitude of others, are crying out that it's coming and its going to whack us hard. Yet, people don't seem to pay attention to it. The only thing left is to brace yourself and let it hit. Maybe then people will realize they are in the midst of a train wreck.

Thursday, October 29, 2009

I have almost no doubt by next year at about this time, and probably earlier, Obama's approval ratings will be hovering around 40% as the economy remains mired in double-digit unemployment and as the guvt money to "stimulate" the economy runs out like sand through fingers. My opinion is that Obama will react by accusing the American people of a failure of will, blame them for refusing to follow him and embracing "politics as usual", and will start to come apart at the seams. I don't think the man will be able to personally handle the failure that follows from advocating insane liberal policies. I believe the lesson he and his fellow liberals will learn is that its your fault. Anyone who knows liberals knows they can't possibly acknowledge that its evidence of the intellectual bankruptcy of their ideas. Silly cult like faith doesn't die easily.

Today a report came out that said 3rd quarter U.S. GDP grew at a decent 3.5% annualized pace. I guess the recession is over. There is no doubt that Obama will stand up and give a speech declaring that his government spending policies are responsible. He has pumped almost $200B of the $800B stimulus into the economy and, more significantly, the Fed has basically flooded the economy with about $2Trillion dollars!

Unfortunately, the recession is actually a long way from over. How an economy grows is actually surprisingly easy to understand. The bottom line is that people invest money in a product or service that people want to buy. As more people buy the goodie, more people are needed to help supply it. This creates jobs, gives people a goodie they like, and is repeated millions of times for companies both big and small. The majority are in small companies.

Despite all the government spending and all the fascinating economic theories espoused by people like Paul Krugman, the fact is the basic facts don't change. Smart people can tinker with money policies, microeconomic tax policies to influence individual behavior via incentives, or just plain give people Obama guvt money. All these things are short term. The plain fact is that unless people are doing what was described in the previous paragraph these tinky dink academic economic theorists will not get us out a recession.

People always have a vested interest in making money and are naturally inclined to want to take risks and start or enhance a business. But there are limits to how much risk they will take when they perceive that government doesn't really have their interests in mind or understand what they face when they embark on a business venture. Current government policy is incoherent. It heaps new taxes on people and has the added disadvantage of being big and confusing because it is not yet transparent. Since business people have to plan long term, it is delaying a serious American economic recovery.

So celebrate the good news. America: You grew. Don't worry about the money you borrowed or how you will pay it back. For tomorrow will be dealt with tomorrow. In the long run we're all dead anyway. Carpe Diem!

Wednesday, October 21, 2009

Nancy Pelosi, that renowned economist, setup the econometric model, isolated the key variables, get her R-squared to a point she liked it, and has decreed that the stimulus has saved 1M jobs. At a price tag of $787B that's only $787K per employee in just 9 months. Not a bad way to make a living if your one of the lucky million! I'm not sure how much has been spent. At this rate a check is bound to show up in my mailbox at some point. There are about 140M employed people to begin with (and shrinking). Maybe they can claim we all have a saved job thanks to their effort at some point. Thank you for my job dear leader!

Thursday, October 15, 2009

The storm killed some 1,600 people in Louisiana and Mississippi — and damage has been estimated at roughly $40 billion.... "I expected as much from the Bush administration, but why are we still being nickeled and dimed in our recovery?" asked Gabriel Bordenave, 29, of New Orleans."I wish I could write a blank check," Obama replied, promoting Bordenave to shout back, "Why not?"

Why not? Really? When the government is bailing out banks at $700B, spending $787B in "Stimulus", giving $50B to the auto industry, $13B to seniors, expanding healthcare by about $800B in 10 years, $3B to cash for clunkers, an $8K homebuyers credit (which will be expanded), and aslo giving away billions in other treats to community colleges, wind farms and solar, expanding unemployment benefits, what's another $40B for the folks in New Orleans? Seriously?

Thus, the evidence is clear that we must ban smoking in public places. There comes a point where well meaning people have to basically stop caring so much. I sometimes feel as though the government thinks it cares more for me than my own mother. It's going to protect me from secondhand smoke, save me via seatbelt laws, help me if I have a flood, get unemployed, need food stamps and housing, and give me a check and ensure I have healthcare when I'm old.

I can't help but think that there is a price I have to pay in order for all these wonderful gifts. The dollar price is clear enough. I do pay about 6.2% of every dollar I earn for that check that will come from the Treasury when I'm old. Assuming the fund is still solvent in 25 years. That's a big assumption. There is also the 3.1% I have to pay for my medicare gift.

Then there's the basic enjoyment people get from eating out, drinking soda and alcohol, or smoking cigarettes or cigars. I personally do not understand the attraction of cigarettes. I do smoke cigars. But it is more often a social thing and it helps me unwind. It's my guilty pleasure I suppose. But I've made many friends because of our common interest in cigars.

I get a sense that all this caring can't help over time but make people maybe a little dependent on its source. I like to think I care about myself and can weigh risks and rewards regarding how much I drink and smoke, what and where I eat, how I enjoy my leisure time, and so forth. Apparently, the government folks from on high feel they need to help me by studying the matter and than drawing clear lines about what I can and cannot do based on the results of the analysis.

I know that at some point I am going to die. I know that at some point I am going to get sick. I know that life is filled with risks from driving to entering into a bar where people smoke to possibly crossing the street. I am thinking that this type of control and this general lack of maturity in the population is taking its toll and government mandates are only going to increase in the coming years. When people can't police themselves and act somewhat modestly, the police have to step in and regulate and create more and more laws to deal with the more and more forms of lawbreaking. Maybe this is where we are. Maybe the government is justified. Maybe the American people no longer really deserve to be respected as reasonably capable to act responsibly. So long as we have what we need, what do we care? Just give me my checks and protect me from myself and others. Thank you dear leaders.

"By the end of 2019, according to the administration's budget numbers, our federal debt will reach $23.3 trillion—as compared to $11.9 trillion today. To put it in perspective: U.S. federal debt was equal to 61.4% of GDP in 1999; it grew to 70.2% of GDP in 2008 (under the Bush administration); it will climb to an estimated 90.4% this year and touch the 100% mark in 2011, after which the projected federal debt will continue to equal or exceed our nation's entire annual economic output through 2019."http://online.wsj.com/article/SB10001424052748704107204574470961505506386.html?mod=WSJ_hpp_RIGHTTopCarousel

"It goes without saying that part of the gold price advances were also caused by further weakness of the U.S. dollar. Is the greenback now finally finding some support at current levels? We have our doubts and continue to be bearish on the U.S. dollar for several reasons. Although we think that the risk for strong inflationary pressures have fallen somewhat, it is clear that the U.S. does not have too much interest in a strong currency. With the amount of government debt now at record levels, the last thing the U.S. wants is a strong currency.Also, the U.S. dollar’s role as the world’s sole leading currency is coming to an end, and, although it will remain an important currency, its share of world currency reserves is going to fall further from here.The recent rumors that the greenback will be replaced as the “oil currency” gives clear evidence that the relative importance of the U.S. dollar is falling.Although the current amount of government debt is almost mind blowing, we don’t think that it is a hopeless situation. Compared to the size of the U.S. economy it is still manageable but in our view drastic measures to correct the unpleasant situation need to be taken."

I wonder if the auther would consider starting a new $800B over 10-year new healthcare entitlement a drastic measure to correct the unpleasant situation.

The bottom line of a weak dollar for you:1. Commodity prices will increase. You will pay more for food and gas. This is because as the dollar loses value, these assets see their prices rise as investors flood money towards them instead of investing in assets with dollar denominations such as bonds, etc. Plus, exported goods from other countries will become relatively more expensive. The positive of this is that goods we produce for export will become cheaper so maybe we can sell more to the rest of the world. If you work in an industry that exports goods you may benefit.

2. Your debt may not be a big deal. If the value of the dollar plunges, your home values may rise as more people use money to invest in physical assets such as real estate. Your home value may go up as a result in the long run. Also, a weak dollar will likely lead to inflation.

Overall, 1 and 2 means it's good for what you own and in devaluing your debt. It's bad if you got to buy food and gas.

3. The worst thing about a devalued dollar is that it alters business investment decisions negatively and long term planning is confused for those who have to think about boring business stuff like where should we open a new store? should we expand a line of goods? open a new factory? Since jobs don't grow on trees and are a consequence of these types of things, it's really bad news for you. But cheer up. At least you'll have free healthcare!

Monday, October 12, 2009

In recent weeks my ire has not been raised as it has been throughout the year. I am increasingly resigned to the feeling that this is how it's going to be for awhile. No sense in getting a rise from it.

The other day I was having a conversation with a friend who is a big fan of the Constitution and America's founding fathers. He mentioned that the Founders knew that if the government grew to be too big, people would start to vote for it to get even larger so they could personally get as many goodies out of it as possible. The Founders cautioned that a Democracy can't long exist if that's the case. I have heard that before. It's about where we are. I am resigned to it.

As I read the daily paper, alarm bells go off on at least several pages every day. I have blogged ad nauseum about a variety of things. In recent weeks it's been reported that as the dollar is sinking as commodity prices are rising. Foreign exchange markets are moving away from the dollar as the reserve currency. The dreadful ramifications of that are too long for me to explain today. But rest assured, it's not good for our country. And who really cares anyway? It's all a bunch of jibberish. The dollars sinking? What does that mean? So long as I can buy a can of Coke for 75 cents, to me it's not sinking. Just give me my healthcare. And save me money from expanding this entitlement while you're at it. Make sense? Iran is vociferously threatening Israel, which they've always done. But now the actually have real nukes and a religous fanatic at the helm. The death toll is rising in Afghanistan. Our economy shed another 263K jobs last month and within about a month or two we'll have 10% unemployment. But that's old news.

It seems we're in a new country. We're remaking America. While she was imperfect, I will miss her. What comes next and how it will look is anybody's guess. I sense the adults are no longer really in charge. We're no longer concerned with the price tag of anything, we just seem to buy and do whatever we want as a nation. There's a real immaturity in our country and in our leaders. Adults have ambitions too. It's just that a mature adult realizes that he has to weigh seriously the price tag and that how much you spend really matters. Mature people know limits. Then again, maybe maturity is overrated. Why have tomorrow what you can have today? We can have it all and we're worth it. Right?

I am coming to accept the new America. In my angrier moments I'd say this is God's judgment and our various moral and social breakdowns are finally extracting a price. But who the heck am I to say what God is doing?

Thursday, October 1, 2009

As I've written, expect this to continue for awhile for other car companies. Why the government does these little "Cash for Clunkers" gimmicks is mystifying. Ah, not really. I suppose the government wants to look good for the masses. At least they can say they did something when really it's nothing. But it plays well in the Styx.

Saturday, September 26, 2009

I have been shocked by the summer stock market rally for about 3 months now. The Dow Jones was almost at 10,000 before it started falling this week. I can find no rational reason why it has or will continue to stay at anything above 8,000 to 8,500 levels. If I am right, a lot of investors are going to lose a lot money pretty soon.

The article linked above says the government is propping it up and the Fed is creating artificially high asset prices through its ludicrous, short sighted policy of printing money and holding Fed discount rates at 0% to 0.25%. If this continues not only are we going to see the stock market fall we are on the verge of another economic collapse. I sincerely hope that what I am seeing is wrong because this could have very negative social consequences. If the number of unemployed people grows to depression type levels we are in for a major upheaval, crime, and all other kinds of very serious problems.

Despite the Fed's magic tricks, you can't prop up a needed correction artificially. It will come if you maintain stable policies and let the market correct itself. I am starting to sound like Ron Paul. He seems to be the only political figure who is recognizing the ramifications of what the Fed is doing.

Oh did I say "tax"? Obama said it wasn't a tax on last week's sunday shows. No, its just a moral thing that people have to now pay up to $3,800 a year to the government whereas they didn't have to before this plan. But it's not a tax. Definitely not a tax. To paraphrase Obama don't be so stupid people. Let's talk and be serious. C'mon people.

Here is a quote from the article: "According to the Congressional Budget Office, the average uninsured person or family will have to pay between 15 and 20 percent of his or their total income on health insurance (counting premiums, deductibles and co-payments) before any of the subsidy in the Baucus bill kicks in. Even in the more generous House bill, the tab that the uninsured must pay is very, very high."

After this mess plays its course, conservatives will need to move in the future towards having people pay more for their healthcare. Unlike Obama's bill they won't be taxed and pay the government. But they will need to pay the doctor and hospital instead of the government if sanity is to be restored to the provision of healthcare services.

Conservatives should not be arguing that liberals want to take away the free goodies and that's bad. The bottom line is that whether you are insured or uninsured, for the system to work fairly people do need to pay more for what they use. If they don't use healthcare services they pay less. If conservatives frame this argument as though the plans are bad because patients will be responsible to pay more, that will come back to bite them when the American political pendulum swings back and they are in charge again.

Thursday, September 24, 2009

I posted a few months ago that all the hysteria about the housing market was overblown because people buy homes in the Spring. Those numbers don't represent recovery. Today, existing home sales were reported to have dropped by 2.7%.

This is very likely to continue. I'm only surprised that most economists were surprised. You know what? Car sales are also going to drop over the next several months. The economy is on life support due to the technocrats at the Fed. Plus, yes, a nearly $800B government pork plan can't help but prop up some spending to keep the illusion rolling through the end of this year. So it won't be disastrous again until early to mid 2010.

You can fool some of the people some of the time. But illusions and Federal Reserve Bank magic tricks can't be played forever. Eventually, real people have to take real risks and invest. With this president's policies and the amateur night comedians he has put in charge of economic policy, I don't see a sustained recovery. Hopefully, I am wrong.

Tuesday, September 22, 2009

Today President Obama was in New York telling Israeli and Palestinian leaders to finally resolve their going on like 3,000 year feud. I guess it's only been 60 years now since the modern state of Israel was founded though.

"Simply put, it is past time to talk about starting negotiations — it is time to move forward," Obama declared, displaying an unusual level of public frustration as he prepared to sit down with Netanyahu and Abbas for joint talks after meeting with each separately. "We cannot continue the same pattern of taking tentative steps forward and then stepping back."Spanning over two hours all together, the talks found all leaders promising to work to resume peace negotiations but also often using language described as "blunt" and "direct." Both leaders kept stressing with Obama their own priorities and fears. Obama in return emphasized a need to take risks and give up some things for a bigger goal, said a senior administration official."

I suppose that I am pessimistic about the odds of success here. But who knows? Maybe Superman can come in and save the day.

The site of Obama lecturing these people reminds me of a Muhammed Ali anecdote - Ali gets on a plane. The flight attendant says he needs to put on his seatbelt. Ali replies "Superman don't need no seatbelt. The attendant replies "Superman don't need no airplane either".

At some point a man runs up against the limits of reality. I am not sure Obama's view and understanding of the world has fully achieved the balance between having hopes and dreams and being just plain realistic in what a man can reasonably hope to achieve through his efforts.

Here's to you Superman. May your dreams of peace in the middle east come to fruition. And may my dreams of winning the lottery, flying to Mars by flapping my arms, and eating Cheesecake factory cheesecakes without gaining weight all come true. A man can hope.

Wednesday, September 16, 2009

Today Sen. Max Baucus came out with a healthcare plan, a year in the making. Two WSJ quotes from Republicans struck me:

1. "The bill was swiftly denounced by Senate Minority Leader Mitch McConnell, who complained it would cut Medicare, which provides insurance to the elderly, and impose new tax burdens on families and small businesses."

I am not for new taxes. But these Republicans are complaining that Medicare will be cut? So the GOP is for a certain type of government healthcare but just not the Obama one? Why aren't these folks for cutting government whenever you can in one form or another, especially when a Democrat is proposing it?

I understand why the GOP lost and squandered the 12 years they had power and the 6 years they had both the presidency and the Congress from 2001-06. This party has no overall guiding principles. The motto appears to that whatever Obama is for we're against. Republicans should be advocating that we have to return to individual responsibility so that when you require a healthcare service you pay for it except in catastrophic scenarios where the out-of-pocket deductible is more than $10K or some other number. That's where insurance should kick in. We've divorced personal responsibility and any consequences from how we pay for and use healthcare. I've been conditioned to think I shouldn't pay anything at a doctors office more than my $10 or $20 copay too. But is it realistic to think that can go on forever?

Instead of restoring sanity and making people responsible and not just shielding them from every possible hardship that may arise, the GOP just continues to pander. If they can't live without Medicare and the bigger government it represents they deserve to be in the minority. There really is no place to go for an average conservative person.

Tuesday, September 15, 2009

I have known my share of Wall Street people. While there's no one Wall Street job, generally the financial industry based in Manhattan is a tough place to work with lots of hours. People who work there are generally competitive and have a goal of making a lot of money. My first job out of college was as a trainee with a stockbroker firm. After about two days, I realized I didn't like it so it didn't stick. The folks who work there aren't necessarily brilliant people or uniquely special.

Obama's speech to Wall Street yesterday was loaded with the term "responsibility", "crisis", and "risk". My sense is that your average Wall Street financial guy hears what the president said yesterday and finds it somewhat condescending. They don't tend to feel that they are irresponsible to clients or take unnecessary risks. Although some really are awful people. Generally, most are not though.

Obama's problem is that he paints everything with a broad brush. Everything is a systematic crisis. He doesn't really get too far into the details to understand that there are specific things that need to be changed in healthcare, finance, or whatever else. You don't need to blow everything up or talk so broadly that nobody knows if what you're saying applies to you or not. I realize details aren't inspiring. But they're called for when things are complex and answers require nuance and sometimes subtlety. A big hammer or remaking America or offering a new framework isn't the answer to every problem.

Thursday, September 10, 2009

In yesterday's Obama big wing ding thing of a speech, he made quite a pitch. He said we have to look beyond economics because healthcare is a moral issue. I agree to a point. Healthcare is both a moral and an economic issue. In this issue, as in much of life, they are very much connected.

First, it's an economic issue because it is allocated via transactions with people getting paid for a value added skill they have, people paying because they are in need of the service provided by that skilled person, and time being used. All of these are known as constraints in economic terms. It has all the hallmarks of your classic microeconomics models that you learn as an undergraduate. The money and the time are a scarce resource because we don't live in a world of infinite resources in terms of time or money. We have to choose to maximize the best use of the persons skills to benefit the greatest number of those in need of those skills. For this they pay cash and hopefully, it is efficient so that neither time, money, or skills are wasted.

Second, it is a moral issue. There is a right to LIFE, liberty, and the pursuit of happyness. Be happy people! The primary question is who is the arbiter of morality? In modern America, we look at the government as the only entity for these types of things who can help provide what is morally just or what we deem to be social justice. Why should the poor not get the same type of care that the rich get? This question is about as profound as the songwriter's question: Why do fools fall in love?

The goal of any healthcare plan should be to strike a balance between not literally handing things to people to actually rob them of their dignity while not so harsh as to cause them to steal bread because they cannot eat otherwise. The healthcare proposals do not necessarily achieve a right balance. What happens if people simply don't pay the individual 2.5% tax on income or $3,800 per year that they will now have to in order to comply with the plan? Is jail an option? What if they can't pay it? What about the employer who can pay it on paper because they're rich but they have to layoff a few employees because their cost structure just increased? Is it moral if it leads to greater job loss?

All in all, morality is never so black and white. It should be a little concerning to all of us when we look to government to help us and especially when a government invokes the cause of morality to do so. This has been a bad idea since even before the Christian Crusades. Obama recognized in his speech that we are inherently distrustful of government and said it was good to be. He turned it around though and essentially asked us all to trust him. We have to get over it in order for this moral man to do what is moral. Even if I trusted him, I would still not be able to trust what he's setting in motion. We would do well to listen to the author Joseph Conrad before we give up being the only advanced nation without universal coverage:

"The scrupulous and the just, the noble, humane, and devoted natures; the unselfish and the intelligent may begin a movement - but it passes away from them. They are not the leaders of a revolution. They are its victims."

Eventually, Obama will depart from the stage. And who will be making these decisions after he leaves? Will they be wise? A government program once started does not stop when the man who set it in motion exits. You can trust him? You should be very concerned where any major government program goes. Government in this country is well beyond the point where it should be. Starting another one only further entrenches it. Is this really what we want?

Tuesday, September 8, 2009

“Washington is shifting the burden of bad choices today onto the backs of our children and grandchildren,” Obama said in a 2006 floor speech that preceded a Senate vote to extend the debt limit. “America has a debt problem and a failure of leadership.”Obama later joined his Democratic colleagues in voting en bloc against raising the debt increase.

Today, President Obama is asking the Senate to raise the debt limit beyond the $12.1 TRILLION dollar limit. For a president who spends more per day than most countries see in a year, this is delicious irony. Unless you're young and have to eat what he's serving up for you in the future.

Sunday, September 6, 2009

I think this dude is getting dumber by the day. http://www.reuters.com/article/lifestyleMolt/idUSTRE5850F320090906 When Moore first started, I actually thought Roger and Me was pretty good in a 60 Minutes, gotcha sort of way. But it really went downhill pretty fast. The F-911 was a mindless Bush Bash with its constant "we're gonna smoke em'out" references to old western TV shows and interviews of hillbillies to make some mean points at the expense of a few southerners.

In his new movie, Mr. Moore apparently wants to replace capitalism with democracy. Despite centuries of political thought expounding on the link between the two, according to Mr. Moore, they are now mutually exclusive so that you can have one with the other. Is he suggesting that America is capitalist but not a democracy? I suppose we're more a Republic. So maybe the genius is technically right and America is not in fact a democracy.

The type of thought embodied by Mr. Moore makes clear why it is wise to spend at least some time during the course of your life doing a regular job without a lofty, noble purpose in it. Just doing something because you have to pay the bills. A career as a documentary filmmaker is probably fascinating. For Mr. Moore to arrive at the broad brush conclusion that "capitalism is evil" means his best years are long behind him. Maybe the hardwiring in his brain is set and the capacity for insightful thought is no longer there. This is a caution for anybody getting older to not fall into that trap. Your brain neurons do set and it gets harder to incorporate new information that doesn't fit within your existing paradigms. I'll make a note. NOTE TO RIGHTWING BLOGGING SELF: DON'T STOP CONSIDERING OTHER PERSPECTIVES.

Friday, September 4, 2009

But we only lost 216K jobs in August. For football fans the jobs data over the last 3 months has been akin to a team going 2-14 last season and now playing at about a 4-12 or a 5-11 level this season. It is still awful, the schedule was soft because you were a losing team starting in a depressed position, but you have a few guys who can play so that it's not a total collapse.

Looking beyond the clutter and in the details of the BLS report that monitors job losses, there are two very alarming trends. First, the total raw number of unemployed persons actually rose by 466K and employment fell by 392K. Second, another 143K people dropped out of the labor force. These are in Table A in the following link. http://www.bls.gov/news.release/empsit.nr0.htm

The "unemployment" line and the "not in labor force" line tend to go in different directions. In August the unemployment line went up significantly, which means that people are looking for jobs and not finding much. If they go back to leaving the labor force that's bad too, although the rate wouldn't top 10 or go up much. It's a case the unemployed being hopeful in August and that's why the rate went up significantly. More people are counted in the unemployment rate in August.

All in all, we are still akin to a 5-11 team. Looking ahead you don't necessarily see the makings of a good team because there are still a bunch of weak players such as Obama, a Democratic Congress, etc. plus you have fundamentals such as low interest rates, coming tax increases, looming bank failures, a debt problem, a ridiculous healthcare agenda, stimulus pork that isn't working, and a Fed that can't pump money into the well forever. It's one thing to go from 2-14 to 5-11. We may even go to 7-9 at some point this year. It's quite another thing though to go to 12-4 and contending for a title. With a president and congressional leaders and current economic policymaking that doesn't understand basic free markets, incentives, and business cycles, I have a hard time believing we're going to be making a championship run anytime for at least several years when we get a new administration who hopefully understands how to build a team. Although that's not inevitable because you do have teams that lose for decades. I hope that's not the case for America.

I actually find it a sad state of affairs when people are so distrustful of the president that anything he proposes is deemed to be sinister. There would be nothing shocking about this if it were Eisenhower, for example, asking it during the 1950s. The problem is that government has become such a central part of people's lives and its reach is being expanded that you can't help but think we're entering a period where our basic freedoms are being chippeed away. Were the government a relatively small part of our lives and not involved in everything from finance to healthcare to education to so many other things, this type of thing would not feel like yet another intrusion into our lives.

We are so beyond the point of government being too big that it's not even worth pondering new government "solutions" to whatever challenges we face. At this point people need to stop asking government to do things for them. The problem is that normal people are now relying on it for everything from retirement to insurance if there's a natural disaster to unemployment benefits and whatever else. The system is already beyond its scope. The only thing to do now is wholescale cut it down at every level. We all need to stop looking to the government to meet our needs. If we can't do that, we deserve to have our freedoms reduced. With freedom comes responsibility. You can't give childred unlimited freedom. We all need to be adults and stop looking to government as though it is our parents.

Wednesday, September 2, 2009

President Obama has decided to start offering up his own details on healthcare. For the past several months, he's deferred to liberals in Congress to write his healthcare overhaul plan for him. He's now going to take charge! It's eye of the Tiger, Rocky Balboa time.

This is sure to enrage his fanatical liberal base. For them, a public option was merely an intermission before the real end of having a one-payer healthcare system run entirely out of the federal government. Obama will probably propose a Co-Op type of approach with no public option. This is still not optimal and does not go towards reducing healthcare costs overall. The best scenario is to have people pay more out of their pocket for what they actually use and to increase competition by allowing healthcare to go across state lines. Currently, you have co-pays, healthcare restrictions per state, and lawsuit threats that result in doctors ordering tests that may not be need. The reason doctors order tests is not so much to collect extra fees, as Obama suggested, but to cover their rears legally.

This new approach depends on him winning over independents. He's going to have to win more of them than he loses from his base. I think he's going to have a hard time doing that given his radical economic spending policies. They may already be gone because of the Obama credit card spree. A Co-Op is something that can be undone or modified down the road by future presidents. So it's not as big an irreversible disaster as anything with the term "public" in it. It depends on the specifics of the Co-Op though and if it is left to the private market as the mechanism for resource allocation. If not it's just a new name for the same piece of ... (chocolate bar in the pool).

Tuesday, September 1, 2009

I learned a long time ago that you to have to take responsibilities for your actions, that doing is harder than criticizing, and that you can't blame others for your circumstances or make excuses for too long. Sooner or later you have to hone up to your mistakes and be thankful for your successes. Nobody inherits perfect circumstances no matter what your walk in life. We all wish we could change certain things. Eventually we all have to come to terms with the things we can and cannot change and determine, within those constraints, a way forward.

The following quote from the Obama spokesman in a Reuters article made me realize the core reason why I have a sense that the Obama presidency is going to fail so miserably. The quote is an indication of a type of character.

"The White House sought on Monday to pin the blame for the grave state of the war in Afghanistan on the Bush administration, which made Iraq its top military priority. 'This was underresourced, underfunded, undermanned and ignored for years,' White House spokesman Robert Gibbs said. 'The president is focused on ensuring that we meet measurable benchmarks. ... It's going to take some doing.'"

There's nothing particularly bombshell or out of character for that quote. I've been hearing the "it's Bush's fault" thing since Obama's campaign started well over 2 years ago. He owes Bush a great deal because in normal times there would be no chance a nobody like Obama could be president.

The problem for Obama is that it's now September 1. He's been president for a good amount of time now. He's building a track record. To blame Bush for the recent problems in Afghanistan is wrong and it's actually a lack of grace. The fact is that things happen in the world. It is not really Bush's fault that Afghanistan is heating up right now. Truth be told, it isn't necessarily even Obama's fault. Politicial leaders actually have less control over things than they think. It was cheesy and in poor taste to simply blame Bush. There was no need to blame anybody. Just deal with the situation as best you can. Why blame Bush, at this point?

The problem for Obama is that he doesn't appreciate that it's always easier to criticize as he did during his campaign. But after you're in office you begin, or should begin, to realize that it's actually a pretty tough job once you roll up your sleeves and make decisions within real constraints that don't lead to perfect outcomes. Obama should be realizing that by now. You would expect his appreciation for the constraints and real challenges Bush faced would humble him a little bit so that the nonstop criticism would at least be a little scaled back. But no. In the end, Obama is going to lose respect for this. Any man in any walk of life who endlessly criticizes deserves that fate.

Thursday, August 27, 2009

Not much it would seem, if you relied on the mainstream media. When this type of stuff happened under GW Bush it was headline news and evidence of how catastrophic his Iraq policy was. The death toll was conveniently provided on a daily basis back then.

I've said this repeatedly and I'll say it again. That is a part of the world we are best served to leave alone. There are real terrorists there. They do want to kill Americans. But there we are best served by a defensive strategy. Going there on the offense is a no-win situation. Defensive strategies that contain the potential damage are sometimes appropriate. There are simply too many potential suicide bombers who have nothing to lose and do not place much value on human life in that region for us to win by going head-to-head. Yes, Iraq is different than that place. There are a number of criminals in Iraq to be sure. However, Iraq had and still has a good chance of entering into the modern world. Relatively speaking, I do not believe that to be true of Afghanistan and the tribal regions of Pakistan. We need to get out of there as soon as possible.

Wednesday, August 26, 2009

Senator Ted Kennedy died last night. In the article it was stated that during the course of his 4 decade career in the Senate he "helped enact measures to protect civil and labor rights, expand healthcare, upgrade schools, increase student aid and contain the spread of nuclear weapons. "There's a lot to do," Kennedy told Reuters in 2006. "I think most of all it's the injustice that I continue to see and the opportunity to have some impact on it." Later, the article quotes him "I've benefited from the best of medicine, but I've also witnessed the frustration and outrage of patients and doctors alike as they face the challenges of a system that shortchanges millions of Americans."

As I read the article I thought about how wonderful sounding and pretty noble are these ambitions. On the face of it, who doesn't care about upgrading schools? My kids go to school. I want that. The spread of nukes? It's no good. Stop it. Healthcare for all? It would be great if all Americans could get the same care as Ted Kennedy. Who could be against that?

And yet, after over 4 decades, what thwarts these grand goals? Perhaps reality? Maybe? The problem for liberals, and why I can't be a liberal, is because society is far too complex for simple prescriptions to the challenges Ted Kennedy fought to remedy. And government solutions are not the best mechanism for addressing such inequalities. They actually can serve to hinder remedies. If the answer to every social problem were to have the government spend money or set up a program or provide a direct remedy for it, our myriad of problems would have been solved already.

Unfortunately, anyone who lives life recognizes over time that there are limits to what you can do in terms of time, money, energy, and people. As you mature you realize there are things you can and cannot do. Neither you can nor "we" can achieve all we set out to do. Americans of a college age are fed the idea that they can and should do something to change the world in one way or another. Often, as President Obama said at a college commencement speech, it is recommended they find meaning in their lives by doing government service rather than the menial, apparently empty pursuit of a business career.

I would suggest that the best place to start seriously addressing these problems is to start from the bottom up. You can start by being a faithful friend, spouse, employee, father, student, neighbor. Start local. If our energies were more directed to helping people develop strong character we might find that over time we actually have less social problems to address. Unfortunately the same liberal people who care about people in general don't stress individual character. They focus on the need for community and tolerance and the need to live well together. But how can that be successful if uniquely individual traits such as integrity, honesty, knowing right from wrong, and generally being responsible for your own actions is not stressed? You can't have a strong communal character if a collection of strong individuals with character don't exist within it. To develop character traits you do have to make judgments about what constitutes right and wrong behavior. Liberals are harsh judgers in the few areas they allow for it. But they don't focus on essentials. Government and a stress on community morality plays a role. But it is not nearly a complete answer.

This is not an excuse to be passive and sit back and watch injustice. Conservatives should be and actually are in my experience very passionate in supporting the local activities that make up a better community. That's good. That's more lasting. That's a reason I am a conservative who never got swept up by the grand sounding rhetoric that we should use government to solve every problem as Ted Kennedy espoused.

Hopefully Ted Kennedy will rest in peace. Hopefully we who follow him will be a bit more realistic, mature, modest, and local in how we approach solving problems. While it is foolish to think we can have heaven on earth, we may find we achieve greater success than he did if we go that route.

Tuesday, August 25, 2009

President Obama has slammed his internet, cable TV, and other un-American critics, like those who have gone to recent townhalls, for putting forth "outrageous myths" about his healthcare reform plans. Here are just a few myths to consider:

1. Death Panels. I blogged about this in a previous entry on August 16. To sum it up, yes there are no direct calls for a panel to decide who lives and who doesn't. If my brain shut off at that point and I were inclined to go watch daytime's Jerry Springer or Dr. Phil now I might be content to say "of course there'll be no death panels." However, by "cutting costs" at the same time you're adding to healthcare rolls and eventually rationing healthcare due to budget constraints, as happens in countries where socialized medicine has occured, you will eventually need to convene folks to decide how to best allocate scarce resources. In this case, the scarce resource is time, money, and doctor availability, and the person to whom this resource may not be allocated to is granny. A public option is a highway to socialized medicine. If you read this blog and you still don't understand this by now, go back to bed. I can't help you at this point.

2. End-of-Life Decisions. This is very similar to number one. No. There is nothing explicit on page x, y, or z on any of the healthcare bills that I haven't read that directly says anything along the lines of "granny: you've lived a long life. Don't you think it's time to go now? Living another 6 months will cost us too much. Do it for the team. Pull the plug." However, it is not unreasonable to infer that if this is passed, these decisions will take on more importance. We have an ageing population and scarce reasons. An insightful person could surely piece together how end-of-life decisions will be crucial in the not so distant future in light of massive budget constraints, government debt, scarce medical resources, and a growing number of people on government run healthcare rolls. So it's not in the bill necessarily but should we not really be forward thinking people? Bury our heads in the sand, perhaps?

3. Wait times for surgery will increase. It is getting ridiculous that anybody would consider this argument a myth. Again, budget constraint. Time. Cost. Scarce resources. Are more doctors going to appear? Can nurse practitioners do surgery? Money. Money. Did I say MONEY! Counter intuitively, this actually could be a myth if more doctors pursue specializations in relatively higher paying surgeries rather than lower margin family practices. So, if more doctors go in surgery specializations where the money is, it's possible this could be a myth. Although, the lawyers will need their piece and this could actually discourage it. Overall, this is not a myth because of the experience of other countries with socialized medicine. Prez: Logic is not on your side on this one.

4. Illegal immigrants would get coverage. Well, here the President is clever because they caveat this by saying they wouldn't "automatically" get coverage. But of course they will get coverage because, as the president said a few days ago, we're a compassionate society. I don't necessarily disagree with extending all human beings coverage in dire circumstances. It's just that a myth is not a myth when it's true and you said it yourself Mr. Prez.

5. This would pay for abortion. Again, would it "have to" pay for abortions or would it simply pay for abortions? Just like I don't "have to" have an abortion but if somebody does decide to do so, my understanding is that this will pay for that abortion. It is morally reprehensible to take money from citizens, a majority of whom no longer agree with it, to finance those who do make this ugly choice. The question is if it funds any abortion. If so, than it does pay for abortion and is justly repugnant and not a myth. I don't honestly know if this is in the bill. If not, great. I'm happy to be wrong here if this is indeed a myth.

6. Private insurance will be eliminated. It won't be eliminated but it will sure become an unattractive option for all those now receiving "free" healthcare or to those employees who pay more than 8% of their payroll on providing healthcare. Technically, it won't immediately eliminate private insurance across the board. Down the road it may. In the short term, it will eliminate private insurance options for many individually because their employer will drop it and/or they can't afford it on their own as compared to the "free" or cheap public option subsidized by a government that doesn't have to earn a profit because they can always print new money. Private insurance can't do that. It depends on who's perspective you are talking about. But from the perspective of many, this bill will essentially eliminate private insurance as a viable option in the near term.

All in all, it's a sad state of affairs when even somebody as dim as me can blow a whole through President Obama's rhetoric. I welcome his attempt to explain this and make clear what he intends. Go sell it. The problem is not the salesmanship so much as the product. You may be able to sell ice to eskimos but don't try to sell me poop in a bag and tell me it's lunch!

Monday, August 24, 2009

I trust that by now everybody who needs a new car and happens to have a clunker to trade in has done so. The program ends tonight. Dealers are assured they will get their money even if the government bureaucrats haven't been as efficient as they no doubt will be with healthcare when it comes to paying them the $3,500 to $4,500 they're owed. It's been a solid couple of weeks of sales for auto dealers with all these new cars movin' on out the door. It will undoubetedly have an impact on GDP and jobs in the next series of reports that come out. Happy days are here again!

And now comes the fun part. As surely as the gimmick spurred new car sales it will crush them in the weeks and months ahead. It's a sad state of affairs. Auto dealers should probably not spend the wad just yet. The likely forecast is rain, rain, and more rain. The busy season was fun while it lasted wasn't it?

Oh and don't forget, soon we will enjoy "Cash for Refrigerators". http://news.yahoo.com/s/bw/20090824/bs_bw/aug2009db20090821304909This sequel is sure to be action packed. So, consumers don't put the credit cards back in the wallet quite yet. You too can be part of $300M taxpayer giveway. The budget wasn't as high as the $3B for the original. But it's sure to have laughs, love, action. Shop early and often. I hear they're already planning for a trilogy to be announced soon at a theatre near you.

Today I left a comment to E.J. Dionne's Washington Post article "Why We Didn't Crash". http://www.washingtonpost.com/wp-dyn/content/article/2009/08/23/AR2009082302034.htmlIt actually angers me that space in a national newspaper is taken up by people who have basically nothing substantive to add to the conversation. Dionne is a good example of a guy who has been around for a long time and is now just someone who is famous for simply being famous. You know him so you read him but the guy is not much more substantive than a fat uncle who cherishes the simplistic lessons he learned at Woodstock.

----Mr. Dionne,The premise of this article is so completely ridiculous, it's hard to imagine how you keep your job. You could certainly argue that Ben Bernanke, who you don't mention by the way, was ultra-aggressive in his handling of monetary policy by essentially printing money via open market operations and holding fed discount rates at 0%. It's hard for banks not to recover to some degree when they have such low borrowing costs and the ability to lend at higher rates.

On the other hand, what fiscal policy measures has Obama conducted that would lead you to believe he spearheaded a "recovery"? The "Stimulus" money hasn't flowed through anything yet. His regulatory actions have, if anything, further confused the markets, and his proposals wreak havoc on business people who need to mkae long term plans. Oh, plus the massive debt that his policies, his, have created. Putting money on a credit card to usher in growth, is not serious policy to lead to sustainable growth.

You proceed to imply that we're out of the mess. You're right in a sense. We didn't crash in the short term due to Bernanke's manipulation of monetary policy. You confidently argue that "things could have been a whole lot worse" but you don't know that. They could have gotten better if prices had been allowed to adjust in various markets and the Obama administration allowed things to fail. There is obvious short term agony in this. But markets work like this and it's best for the general welfare in the longer term and the only way to a sustainable recovery. There are no short cuts. The quicker things fail, the quicker they can adjust provided there is transparency in how policymakers conduct themselves.

You also don't seem to appreciate that investors make long term business cases and this president's intervention is a net negative on that. I can vouch for this with my own company. We are planning cuts in the years ahead and not expecting growth. People form long term expectations. With Obama and bigger government, you don't take risks or plan optimistically if you are even somewhat reasonable.

Friday, August 21, 2009

And that does not include the $1 Trillion plus in national healthcare. That's up from the Obama team's forecast. Over the last several decades we accumulated a deficit of over $11 Trillion, to put it into perspective.

Thursday, August 20, 2009

Our president has declared that "we are God's partners in matters of life and death". As a Christian, I have always believed that God works His will through the people He has created. We are to live by faith knowing we don't understand everything. He certainly loves His creation and gives us gifts, knowledge, creativity, and all that makes up a human person. But partners? I don't know if I am a "partner".

This also assumes the "we" he is referring to is individuals. In that sense no, I am not a partner with God. If he is saying the "we" is liberal democrat politicians and the government in general is a "partner" we have real problems. The government is allowed by God and is ideally intended to serve the welfare of the people in practical ways. Taking it to mean that the government has the authority or in some sense is a unique partner with God or even close to that level is fraught with danger.

I know that I shouldn't give Obama too much credit for thinking this through. He sort of says stuff and you think you get the idea of what he's saying. I obviously don't think he wants to institute a theocracy administered by the Federales. If Obama was a song he'd be good melody, harmony not so great, and the substance of the words would be pointless and circular. He's a good 3-minute tune but you have to make sure you don't think too hard about what he's saying.

Wednesday, August 19, 2009

I have long suspected that American reliance on China to fuel its growth for exports and as the lender who finances our debt has always been suspect to me. China seemingly has pockets that don't end. How is everybody else struggling but they seem flush with cash? How do they do it?

I confess to not having an army of data to support these assertions. Maybe China has been incredibly responsible and foresighted and is well positioned for this time. Maybe, as I've read, China has an unsustainable, easy money policy that may be setting up their economy for a major crash. Plus, it is always easier to grow from low levels but there comes a point when growth rates are harder to come by as you get bigger and bigger. This may not be good long term news for America if our sugar daddy's funds start to go south. I know China has been buying up commodities in everything from diamonds to aluminum to whatever else in places around the world. What happens if these investments don't pan out exactly as envisioned?

I am a little skeptical about China. It's just my intuitive sense that all can't be that great. I think it's something to watch.

Monday, August 17, 2009

Our president is apparently changing his tact on a public option run by the government. Where will we get hundreds of billions in new efficiencies to be squeezed out of America's 7,500 hospitals now? A cooperative. I am a little concerned because with only more than 1300 private health insurance companies in the private market, what will the lack of one more option do? The reluctance to tackle this monopoly is a bit confusing. I guess we'll see the details of our president's new plan when Congress writes it for him. He can't be expected to write his own plan and lead here. C'mon people. You didn't elect him to seriously lead, just to give good speeches, spend trillions of dollars of borrowed money for the short term, and just be a generally cool guy right? He's a great campaigner. Not so great a president.

Sunday, August 16, 2009

Where is there talk about goverment death panels in the recent healthcare bill? As far as I can tell it is nowhere to be found.

Does this mean that because it is not in the current bill in sect. x.y.z there won't be death panels in which government bureaucrats decide whether or not to "pull the plug" on Grandma? No. The problem is that in the long run the cost of providing healthcare will increase dramatically as more and more migrate to a "free" or lower priced piblic healthcare option, and business will as I've outlined in detail in previous posts. As costs increase and run up against a predetermined budget constraint which limits how much more can be spent, bureaucrats will need to decide how they deem it best to allocate scarce resources. Don't worry because the new 150,000 government bureaucrats the Federal government needs to hire to oversee it will do their best.

As these bureaucrats or a national health board or something like that meet they will need to provide guidelines as to what constitutes cost effective treatment. If they have a system with a limited number of doctors and nurse practitioners and a caseload that is more than they can handle, invariably a choice needs to be made given the immediate situation. If this means we have at any given point in time, come say 2022, and there are 8,000 kids under the age of 18 and 11,000 Grandmas in need of immediate care, the kids will get likely get the treatment. Grandma may die. These actions and the subsequent result is probably why some critics are calling it a death panel.

It may be very reasonable in light of the situation from society's standpoint to treat the kids and not Granny. However, the better way is to expand the constraint and not put authorities in the position of having to make such a decision. We should encourage more doctors, improve incentives via having people pay more for what they use, make patients more accountable for their choices, and incentivize industry and especially doctors to integrate technology to better run their practices. Oh, and we need desparately to do away with lawsuits so that doctors don't prescribe treatment and make referrals solely for lawsuit avoidance reasons, as they do in droves right now. To argue that a government public option will achieve these objections and at lower cost is truly laughable and actually a bit embarrasing.

So, yes it is likely that getting the government into healthcare will at some point require death panels. I know it is not explicitly in the bill. The purpose of analysis and an analytical mind though is to draw connections. Any sheep can read something as though its a technical manual on how to setup a stereo. As the President likes to say "I am willing to have a serious discussion" as he trivializes his opposition. So, yes, let's be serious and start thinking about the future consequences of our actions today.

Friday, August 14, 2009

I have mixed feelings about Ben Bernanke, the Federal Reserve Grand PooBa. On the one hand, the man was shrewd. He basically pumped so much money into the economy and kept Fed discount window interest rates so low that banks almost couldn't help but survive. His actions probably did save the economy from a financial collapse. The low interest rates have helped enormously. He's also been fairly transparent and predictable. All the money he's pumped in via open market operations and buying various instruments has helped in the short term. You could certainly argue that he did a wonderful job in the short term. Monetary policy is what is driving this short term "recovery" despite the daily barrage of nonsensical economic policies from our President.

On the other hand, it can be argued that he is artificially propping up a host of assets that need to come down to levels that reflect reality. The school of thought, which I subscribe to, is that the quicker prices adjust, the quicker we can truly recover. The fact remains that people are still borrowing too much and the housing market is still in serious danger. If and when interest rates rise, it will swamp a whole lot of people who borrow, which is most homeowners. His low interest rate gifts can only go up from here. And he can't essentially monetize the debt indefinitely. At some point the private economy has to lead the way out of the recession and not clever Fed policies designed at manipulating key variables.

My own sense is that this recession is different from previous ones. The reason is that some key variables and incentives are in place that likely will not last forever. Interest rates on 30 year mortgages are extremely low and inflation is extremely low. Where can they go? In addition, welfare benefits can't run out indefinitely, an $8K first time home buyers credit will end, and even gimmicks such as cash for clunkers aren't going to be funded for much longer. This is in contrast with 1981-82 where the rates were high and you could see how lowering them could prove beneficial. In that case, there were obvious barriers to growth and obvious remedies to remove them even if they were indeed painful during the cure phase. It's the opposite this time. The barriers are not as clear and the issues are a little more complicated given the breadth of the current crisis.

So while I applaud his efforts given the hand he was dealt, in which he had a part in dealing due to his tenure throughout the decade at the Fed, he cannot change the underlying substance of what's really happening in the economy. Consumers are horrified because of jobs and businesses, including my own, are making business plans that include cost containment strategies moving forward. I don't have a wealth of data sets to pore through as he does. From what I see and hear from people with money is that we will certainly get beyond where we were. How could we not given where we were? But we are not in the midst of a true recovery. That's not necessarily Ben's fault. What is Ben's fault, possibly, is that his policies delayed a true recovery because they were the artificial actions of a technocrat. I can't critique him too much because monetary policy is being conducted in a way that is at least recognizable to sensible people. Fiscal policy is another matter.

There is an economic news report today that retail sales fell 0.1% in July even as the cash for clunkers (CFC) program was in full gear. This was below the already low expectations and surprising to most economists. Why should it be?

If people are incentivized to buy a car wouldn't you think they would have to offset that expense somewhere else? Unless you expect people to buy a new car and stock up on that new HDTV set they've always wanted in the same month. Who needs to have a budget constraint?

This illustrates the short-sightedness of government policy with the CFC program. Retail sales went down in the short term as people shifted the basket in terms of what they bought in July. The government will also find that people will shift their basket over a longer time horizon when auto sales plummet in the late Fall and into the Winter. Why would they do this? Because people with an interest in buying cars are likely to be doing so now. This will likely also happen in home sales when the $8K first-time buyers credit expires in November. You can expect to see home buying retreat late into the Winter and into next year because $8K is a nice chunk of change.

The Obama economists are essentially playing games with incentives motivated by the stuff they learned in microeconomics classes. The idea is that you try to alter behavior and shift the demand curves out by making goods relatively less expensive. These micro-econ models run up against the problem that they aren't taking into account any longer term timeframe due to the fact that the increase in temporary purchasing power will cause the demand curve to shift back in a short period of time. So long as we have good Q3 growth who cares, right?

Wednesday, August 12, 2009

I found something that makes Barrack Obama the greatest president in our history -- in this one respect.

“The Obama administration is projecting that when the current budget year ends on Sept. 30, the imbalance will total $1.84 trillion, more than four times last year's record-high.”

Without the stimulus it may have only been about twice as much.

There is a website I go to occasionally to get deals on cigars (cigarbid.com). I can attest to how spending on stuff you like is addictive. That site is great. Unfortunately, you spend more than you ordinarily would and end up valuing the higher quantity of good stogies you get less. For Obama, at some point no matter how good you think the deals are, you have to stop spending and be disciplined. Whenever I have gone on a spree at cigar bid, I am reminded of my stupidity when it shows up on my statement at some point. I don’t think Obama’s got that bill yet. Or maybe he really doesn’t care about it since we need 3rd quarter, credit card inspired growth… All he wants, I think, is your approval for the illusion that he's turning things around in the here and now.

Tuesday, August 11, 2009

President Obama gave an analogy today about FedEx and UPS doing better than the Post Office. The implication is that if we have a "public option" your insurance plan and private insurance will do great. Of course, all he wants to do is give a menu for people to choose. Who can be against something so simple? C'mon people. Is he saying that because the Post Ofice sucks, his public plan will also suck? Why introduce it if it's going to suck? I don't know... who can understand the point of today's lesson in Obama-World rhetoric. A couple of things to note about this.

First, healthcare is infinitely more complex than a postal delivery system. To be sure, FedEx and UPS have advanced supply chains and excellently integrate technology into their business processes. But it is a fairly simple system to understand from point-of-order to point-of-delivery even if the quality of the execution differs between FedEx and the Post Office.

Second, the Post Office doesn't have as many stakeholders nor does it make life or death decisions. It doesn't make up 1/6th of the U.S. economy. Nor does it have major medical and technology advances that make treatment life-saving but also expensive.

Third, the government doesn't require certain mandates on what FedEx or UPS can or cannot deliver. UPS doesn't have limits on what it can charge or who it can serve or where it can go and when.

Fourth, Obama is not simply offering another option. There are already over 1,500 insurance options for people to choose from regardless of their employment. He is pricing it (8% payroll tax and a 2.5% individual tax) in a way that makes it fairly compelling for small to mid-size employers to switch. It is also clearly a bridge to a national healthcare plan and results in significant new taxes (up to 5.4%, and sure to grow, for the evil millionaire people) to fund it.

This is not an exhaustive list. But the bottom line is that comparing healthcare to delivery services is another example of how Obama is adept at creating false arguments to show a supposed parallel. This type of misdirection is actually condescending if you think about it. He is very good at offering rhetoric. He doesn't offer solid analysis but for people who aren't all that thoughtful and/or don't have the time to really think about what he's saying, you might be charmed.

Friday, August 7, 2009

Following on the previous post, I can't help but think it is bad news that 637K people dropped out of the labor force in one month. If they had stayed in it during July and been counted as unemployed, the unemployment rate would have actually been 9.8% insted of 9.4%. This variable goes up and down from month to month. When people are encouraged and out looking it tends to go up. When they're not, they drop out. Plus, the third paragraph of the BLS release says that 584K additional people in July are now considered long-term unemployed. That's a massive number by the way.

Suppose all 637K people re-enter the labor force and come back and don't find work during August and there is another 300K job losses. The 637K plus the 300K assumed new job losses would be added to the existing 14,462K. This would amount to 15,399K unemployed persons and an unemployment rate of exactly 10% assuming the total civilian labor force stays constant at 154,504K people. So how does a massive rise in this number portend a recovery?

Call it a mystery and get Sherlock Holmes on the case because I want to know why so many people are no longer counted as being in the labor force? Did these people drop off the face off the earth? I know we're looking for good news. But geesh! Have we all lost our minds?

It's interesting that if you look at the actual BLS website http://www.bls.gov/news.release/empsit.nr0.htm report in Table A, that the civilian labor force and actual employment is shrinking and that the number no longer considered in the labor force is increasing. This indicates that people are dropping out of the job market and are no longer apparently looking for work. This would not be counted in the unemployment rate but is very real if you are one of those 637K people who dropped out in the month of July.

It looks like manufacturing was the big gainer because GM and Chrysler plants reopened. Manufacturing still lost jobs but not by as much in past months. Government, education, and health, and tourism were the only industries that actually gained jobs. It will be interesting to see over the next several months if the dribs and drabs of job losses and if private sector job creation will occur outside of the basic staples that did report job growth. In the months ahead, you should expect to see manufacturing and construction job growth due to the government credit card spending. Of course that's not real long term growth, just a wealth transfer from taxpayers via government spending. It will also be interesting to see what happens in housing now that the prime buying season is coming to an end and banks are picking up the pace on foreclosing.

We are not yet out of the recession and into recovery. We will recover when professional services, retailers, and manufacturing (not due to government spending) start to hire. It is always the private sector that leads to a recovery. Government, education, and parts of healthcare do not meet that criteria.